Existing
Home Sales Plunged Last Month
WASHINGTON, April 24, 2007
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(CBS/AP) Sales of existing homes plunged in March by the
largest amount in nearly two decades, reflecting bad weather
and increasing problems in the subprime mortgage market,
a real estate trade group reported Tuesday.
The National Association of Realtors reported that sales
of existing homes fell by 8.4 percent in March, compared
to February. It was the biggest one-month decline since
a 12.6 percent drop in January 1989, another period of recession
conditions in housing. The drop left sales in March at a
seasonally adjusted annual rate of 6.12 million units, the
slowest pace since June 2003.
At the same time, another trade group reported Tuesday
that consumer confidence crumbled in April as rising gasoline
prices undermined how Americans feel about the prospects
for economic growth.
The New York-based Conference Board said its Consumer Confidence
Index, a widely watched gauge of the economy, dropped to
104.0, in April, down from a revised 108.2 in March. Analysts
had expected a reading of 105. The April reading was the
lowest since August, when the index was at 100.2.
The Present Situation Index, which measures how shoppers
feel now about economic conditions, decreased to 131.3 from
138.5 in March. The Expectations Index, which measures consumers'
outlook for the next six months, declined to 85.8 from 87.9.
The steep housing sales decline was accompanied by an eighth
straight fall in median home prices, the longest such period
of falling prices on record. The median price fell to $217,000,
a drop of 0.3 percent from the price a year ago.
The fall in sales in March was bigger than had been expected
and it dashed hopes that housing was beginning to mount
a recovery after last year's big slump. That slowdown occurred
after five years in which sales of both existing and new
homes had set records.
David Lereah, chief economist at the Realtors, attributed
the big drop in part to bad weather in February, which discouraged
shoppers and meant that sales that closed in March would
be lower. Existing home sales are counted when the sales
are closed.
Lereah said that the troubles in mortgage lending were
also playing a significant part in depressing sales. Lenders
have tightened standards with the rising delinquencies in
mortgages especially in the subprime market, where borrowers
with weak credit histories obtained their loans.
There was weakness in every part of the country in March.
Sales fell by 10.9 percent in the Midwest. They were down
9.1 percent in the West, 8.2 percent in the Northeast and
6.2 percent in the South.
"The negative impact of subprime is considerable,"
Lereah said. "I expect sales to be sluggish in April,
May and June."
Lereah said he didn't expect a full recovery in housing
until 2008. He predicted that sales of existing homes would
drop by about 3 percent this year with the decline in sales
of new homes an even steeper 15 percent.
He said that the median price for homes sold in 2007 would
fall by 1 percent to 3 percent, which would be the first
price decline for an entire year on the Realtors' records,
which go back four decades.
The steep slump in housing over the past year has been
a major factor slowing the overall economy. It has subtracted
around 1 percentage point from growth since mid-2006.
Regarding consumer confidence, "unlike the decline
in March, which was solely the result of apprehension about
the short-term outlook, this month's decline was a combination
of weakening expectations and a less favorable assessment
of present-day conditions," said Lynn Franco, director
of The Conference Board Consumer Research Center, in a statement.
"Rising prices at the gas pump continue to play a key
role in dampening consumers' short-term expectations."
Franco noted that the decline in the Present Situation
Index — the first decline in six months — needs
to be watched closely in the months ahead.
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